Quick Look
• Focus: Understand how superannuation is taxed in different phases — and how to make the most of it
• Key Takeaways:
Super is taxed at 15% in the accumulation phase, but earnings become tax-free in the pension phase
There are limits on how much you can move into pension phase — called the transfer balance cap
Once in pension phase, you must withdraw a minimum amount each year
• Reading Time: ≈ 6 minutes
Introduction
Superannuation is one of Australia’s most tax-effective ways to grow wealth for retirement — but the rules change depending on your life stage.
While you’re working and contributing, your super is in accumulation phase and taxed at a concessional 15%. But once you retire and convert your super to a pension income stream, most earnings become tax-free.
Understanding how this works — including key caps, tax rates and withdrawal requirements — can help you maximise your retirement income and avoid unnecessary tax bills.
Super is more than just a savings account. It’s a tax structure — and the tax benefits can be significant, especially in retirement.
However, if you don’t understand when and how the tax treatment changes, you could:
Pay unnecessary tax on investment earnings
Miss opportunities to start a tax-free income stream
Breach transfer balance caps and face penalties
Fail to meet minimum pension drawdown requirements
Staying informed helps you get the full benefit of the system — and avoid costly mistakes.
This is the phase where your super is still growing. It applies until you choose to start drawing a retirement income (usually after age 60 and meeting a condition of release).
Tax rules in accumulation phase:
Employer and salary sacrifice contributions are taxed at 15% (concessional contributions)
Investment earnings on your super balance are taxed at up to 15%
Capital gains in super are taxed at 10% if assets are held over 12 months
Contribution caps (2024–25):
Concessional cap: $27,500 per year (taxed at 15%)
Non-concessional cap: $110,000 per year (from after-tax money)
Excess contributions may be taxed at your marginal rate
Tip: Accumulation phase is still highly tax-effective compared to investing outside super, especially if your income is above $45,000.
Once you reach preservation age (between 55–60, depending on DOB) and retire or meet another condition of release, you can convert your super into a retirement income stream, commonly called an account-based pension.
Tax benefits in pension phase:
Investment earnings and capital gains on your pension account are tax-free
Pension payments are tax-free if you’re over 60
You must withdraw a minimum amount each financial year (see below)
Example:
If you move $500,000 into pension phase, and it earns 6% ($30,000), that earning is not taxed
If that same $500,000 stayed in accumulation, you’d pay up to $4,500 in tax
The transfer balance cap limits how much you can move into pension phase.
As of 1 July 2023, the general cap is $1.9 million
This is a lifetime limit per person
Any super above this cap must stay in accumulation (and taxed at up to 15%) or be withdrawn
Important:
You can only use the TBC once — partial usage reduces your remaining cap
If you exceed your cap, the excess must be removed and earnings may be taxed
Check your personal transfer balance cap using myGov linked to the ATO.
Once in pension phase, you must withdraw a minimum % of your balance each financial year.
| Age | Minimum Drawdown % (FY 2024–25) |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85+ | Increases to 14% by age 95+ |
Tip: Failing to meet the minimum can cause your fund to lose its tax-free status for the year.
Deborah’s Retirement Split
Deborah, 66, retires with $1.6 million in super. She moves:
$1.6 million into pension phase — fully within the $1.9m TBC
The remaining $300,000 (from downsizing and late contributions) stays in accumulation
Each year:
Her pension earnings are tax-free
The accumulation portion is taxed at up to 15%
She meets her 5% minimum drawdown by withdrawing $80,000
By keeping within the cap and meeting minimums, Deborah legally avoids tax on most of her super earnings.
“Is all my super tax-free when I retire?”
Not automatically. Only amounts moved into pension phase are tax-free. Super left in accumulation continues to be taxed at 15%.
“Can I move money back and forth between phases?”
You can roll back pension funds into accumulation — for example, to reset your TBC — but you can’t just top up a pension account without using more of your TBC.
“Do I have to take money out if I don’t need it?”
Yes — minimum drawdowns are mandatory in pension phase, even if you don’t need the income.
“What if my super grows above the $1.9 million cap after I retire?”
That’s fine — the cap applies to how much you transfer in, not how much it grows to.
“Can I access my super before 60?”
Yes, depending on your preservation age and retirement status — but withdrawals may be taxable if you’re under 60.
Super tax rules might seem complex, but the rewards for understanding them are significant. Knowing when and how your money is taxed — and the rules around transferring to pension phase — can mean tens of thousands of dollars more in your retirement pocket.
A little planning goes a long way. The earlier you understand your options, the better prepared you’ll be to make the most of super’s generous tax treatment.
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Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
How We Keep It Trustworthy
Every article includes a Review & Fact Check section below — so you know exactly where our facts come from, what’s uncertain, and whether there’s any bias.
Review & Fact Check
Fact References
• Super tax rules, accumulation and pension definitions – Australian Taxation Office (ato.gov.au)
• Transfer Balance Cap – ATO, updated 1 July 2023 ($1.9 million)
• Minimum pension drawdowns – ATO, current as at FY 2024–25
• Super contribution caps – ATO, updated 1 July 2024
Unverified or Inconclusive Items
• Case study of “Deborah” is illustrative, based on standard retirement scenarios
Time Sensitivity
• Contribution caps, TBC, and pension drawdown rates may change after 1 July 2025
• Earnings tax rates are current as of May 2025 and may change with future legislation
Bias Assessment
This article is factual and educational, aligned with official ATO guidelines. It does not promote specific products or services and remains neutral.
Super
20th May 2025
Quick Look
Focus: How super is taxed differently before and after retirement—and why it matters.
Key Takeaways :
Introduction
Superannuation is one of the most tax-friendly ways to save for retirement in Australia. But the rules—and the benefits—change depending on whether you’re still building your balance(accumulation phase) or drawing an income (pension phase).
Getting the tax treatment right can make a significant difference to your retirement income. Let’s unpack the key differences, caps, and conditions—so you can have smarter conversations with your adviser or fund.
Context & Problem
Super tax rules are generous—but also complex. Most Australians know super is “low tax” ,but not everyone understands how the rules change when you retire.
In accumulation phase, your super is still growing—and taxed at up to 15% on contributions and earnings. Once you retire and start a retirement income stream (like an account-based pension), your super can become tax-free.
However:
Understanding these rules helps you avoid unnecessary tax—and make the most of your hard-earned super.
This is the default phase for most working Australians. You’re adding to super via employer contributions, salary sacrifice, or personal contributions.
Tax rules in this phase:
To move to a transition pension phase, you must meet a condition of release such as:
To move to pension phase, you must meet a condition of release such as:
In this phase, you draw a regular income and enjoy major tax benefits.
Tax rules in pension phase:
You must withdraw a minimum percentage of your pension account each year:
(These rates are set by the ATO and can change with economic conditions.)
You can hold both accumulation and pension accounts at the same time. For example, if your total super is $2.2 million, you could:
Is all my super tax - free once I retire?
No—only the pension phase account (up to your cap) earns tax-free returns. The rest stays taxed at 15%.
What happens if I go over the $1.9 million cap?
Can I stop minimum pension withdrawals if markets crash?
Do I pay tax on withdrawals?
Understanding the difference between accumulation and pension phase is key to getting the most out of your super.
And when the time comes to retire, the right strategy can mean more income in your pocket, and less going to the taxman.
Getting ready to retire?
Money GPS helps you set up a regular income stream using your super, tailored to your retirement plans.
Available online for $220. You can explore the platform for free and access the advice when you’re ready.
Need Full Scope Financial Planning?
If you think you might need a holistic roadmap that leaves nothing out, consider booking a discovery meeting with a fully licensed Financial Planner.
Book a discovery call with Planning IQ today and take the first confident step towards comprehensive wealth management.
Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
1. Fact References
2. Unverified or Inconclusive Items
3. Time Sensitivity
4. Bias Assessment
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